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Outsourcing: Facts, Myths, and Realities

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I grew up in Dayton, Ohio, in the '50s and '60s. When I was growing up, NCR employed close to 30,000 people and Frigidaire 25,000. Everyone knew people that worked for both companies. Both had their world headquarters here. Besides that, Delco (originally Dayton Engineering Laboratories Company) was based here, as were several other GM plants. Dayton was known as little Detroit. Together, GM (which owned Frigidaire back in those days) and NCR (known as National Cash Register, or the Cash) employed between seventy and eighty thousand people. Then there were all the ancillary industries around those two behemoths. Dayton was the second largest center of tool and die manufacturing in the world.

:align:right>>>So what has happened since the late ‘70s? White Consolidated (now part of Electrolux) purchased Frigidaire, and today you can’t find a single Frigidaire employee in the area. NCR has moved all of their manufacturing out of Dayton and recently announced that the executive offices will be moving to New York. Delco, Delco Electronics, and Delco Products are now part of two companies, Delphi and Raytheon. There is now only a small manufacturing presence in Dayton. All told, those seventy to eighty thousand jobs are down to less than twenty thousand, and heading quickly for ten thousand.

Why do I tell you all of this when I am going to talk about outsourcing? I tell you this because Dayton could almost be a poster child for the change in the American business environment, a change of which outsourcing is a major part. The American economy has changed from manufacturing to service. I want to remind everyone of a scene from that movie classic The Right Stuff. Glennis Yeager is talking with her husband Chuck Yeager. He mentions something about the good old days and she says something to the effect that it is time to move on. So let’s move on.



Outsourcing as a term has only come into use in the last 20 years or so. But the concept behind outsourcing probably goes back long before that. After all, large companies could have had their own fleets of trucks with which to ship products. But in general, they have always used trucking companies, railroads, etc.

Following are some facts, myths, etc. about outsourcing.

Outsourcing is synonymous with offshoring and the idea that an entire work process is going overseas. This myth is a nice political argument, but not reality. There is a lot of outsourcing that is done right here in the US.

We can’t hope to compete on a world stage because of the extremely low labor costs overseas. While this idea has validity, there are way too many other factors for this statement to be totally true.

First of all there is a huge cost component to managing an off-shore process which can quickly eat into savings. For a lot of smaller applications, it just isn’t economically practical. Several years back, I went to visit a potential client in the banking industry. He was talking about offshoring a 15-person customer service operation. He never got very far once he started considering the costs to administer it.

Next there are the cultural issues. Just ask Dell and AT&T (formerly SBC). Over the last couple of years, they have brought certain critical customer service functions back to the US. They were both tired of low customer service ratings and irate customers. While people in India (as well as other countries) who work these jobs are typically well educated and speak English, they don’t relate culturally to how we do things in the US (and that’s something that can’t be taught in a year or two). Anyone who has called AT&T in the past about a DSL problem or called Dell about a computer problem will know what I am talking about.

Finally, there is the little problem of ''We forgot to include those costs'' or ''If you want that, the charge will be higher.'' You would be surprised at how often this occurs for everyone except the largest 500 companies or so.

Outsourcing has led to a lack of jobs in this country. This is one of the biggest myths of all. Today the majority of outsourcing is at the blue-collar level in customer service, manufacturing, etc. Those jobs in this country would primarily be in the $7-$12 range, which is not exactly a living wage (but that’s another discussion). As I have said in the past, the demographics alone show we that have a manpower shortage in this country. A couple of years back, I read an interview with Jeff Immelt, chairman and CEO of GE. In the interview, he said the biggest problem we face in corporate America is not outsourcing but the lack of qualified engineers and similar professionals. He went on to say that the only way to fix this is to encourage people at a young age to look at these critical professions. They may not be sexy, but they pay well and pretty much guarantee long-term employment.

I have mentioned only a few of the realities of outsourcing. There are many more. My point is that it’s not the two-ton gorilla it’s made out to be. All this is nice and dandy, but how does it affect you, the professional job seeker? Here are some suggestions:

As I said earlier, move on. No matter what your wants are, we are not going back to that ''simpler'' time. Computers are not going away. Train and bus travel are not going to make a big comeback. We are not going to throw out microwave ovens, at least not until the quickness and convenience features are put in a regular stove (something that is pretty much reality already). You get the point. Technology advances and the world changes.

If you are in a job that is truly affected by outsourcing, such as an IT, engineering, or manufacturing job, get some additional education and new job skills. As an example, there are tons of good paying IT jobs available, and there are not enough people to fill them. Don’t rely on the government to get you the new training, etc. You will be dead and buried first. Instead, take the initiative. Yes, it’s scary and outside of most of our comfort zones. But like everything else new, once we get familiar with it, it’s not all that bad.

Take advantage of the outsourcing. Because of outsourcing, there are jobs today that didn’t exist 15 to 20 years ago. Someone has to manage it all, someone has to sell it, et cetera, et cetera.

:align:left>>>Encourage the younger generation to look at career fields that are growing, especially as they go off to school. My guess is that most of them are ahead of us and already looking at new options. By the way, there is a shortage of tool and die makers in this country. The local community college has one of the top programs in the country, and they are partially fed by students from an excellent program at the local joint vocational school, but they still can’t fill the demand.

Lastly, keep your skills current and be willing to get training and education to do so. Blacksmiths are in short demand these days, but the cause of that created a whole lot more jobs.

Remember, if I am not the problem, there is no solution.

Bill

About the Author

Bill Gaffney has had 17 years of experience as an executive recruiter and a career coach. He can be reached at 937-567-5267 or wmgaffney@prodigy.net.

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